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Why Robots Won’t Cause Mass Unemployment | Mises Wire

Why Robots Won’t Cause Mass Unemployment robots.PNG0 Comments1 hour agoJonathan NewmanI made a small note in a previous article about how we shouldn’t worry about technology that displaces human workers: The lamenters don’t seem to understand that increased productivity in one industry frees up resources and laborers for other industries, and, since increased productivity means increased real wages, demand for goods and services will increase as well. They seem to have a nonsensical apocalyptic view of a fully automated future with piles and piles of valuable goods everywhere, but nobody can enjoy them because nobody has a job. I invite the worriers to check out simple supply and demand analysis and Say’s Law.Say’s Law of markets is a particularly potent antidote to worries about automation, displaced workers, and the so-called “economic singularity.” Jean-Baptiste Say explained how over-production is never a problem for a market economy. This is because all acts of production result in the producer having an increased ability to purchase other goods. In other words, supplying goods on the market allows you to demand goods on the market.Say’s Law, Rightly UnderstoodJ.B. Say’s Law is often inappropriately summarized as “supply creates its own demand,” a product of Keynes having “badly vulgarized and distorted the law.”Professor Bylund has recently set the record straight regarding the various summaries and interpretations of Say’s Law.Bylund lists the proper definitions: Say’s Law: Production precedes consumption. Demand is constituted by supply. One’s demand for products in the market is limited by one’s supply. Production is undertaken to facilitate consumption. Your supply to satisfy the wants of others makes up your demand for for others’ production. There can be no general over-production (glut) in the market. NOT Say’s Law: Production creates its own demand. Aggregate supply is (always) equal to aggregate demand. The economy is always at full employment. Production cannot exceed consumption for any good.Say’s Law should allay the fears of robots taking everybody’s jobs. Producers will only employ more automated (read: capital-intensive) production techniques if such an arrangement is more productive and profitable than a more labor-intensive technique. As revealed by Say’s Law, this means that the more productive producers have an increased ability to purchase more goods on the market. There will never be “piles and piles of valuable goods” laying around with no one to enjoy them.Will All the Income Slide to the Top?The robophobisc are also worried about income inequality — all the greedy capitalists will take advantage of the increased productivity of the automated techniques and fire all of their employees. Unemployment will rise as we run out of jobs for humans to do, they say.This fear is unreasonable for three reasons. First of all, how could these greedy capitalists make all their money without a large mass of consumers to purchase their products? If the majority of people are without incomes because of automation, then the majority of people won’t be able to help line the pockets of the greedy capitalists.Second, there will always be jobs because there will always be scarcity. Human wants are unlimited, diverse, and ever-changing, yet the resources we need to satisfy our desires are limited. The production of any good requires labor and entrepreneurship, so humans will never become unnecessary.Finally, Say’s Law implies that the profitability of producing all other goods will increase after a technological advancement in the production of one good. Real wages can increase because the greedy robot-using capitalists now have increased demands for all other goods. I hope the following scenario makes this clear.The Case of the Robot FairyThis simple scenario shows why the increased productivity of a new, more capital-intensive technique makes everybody better off in the end.Consider an island of three people: Joe, Mark, and Patrick. The three of them produce coconuts and berries. They prefer a varied diet, but they have their own comparative advantages and preferences over the two goods.Patrick prefers a stable supply of coconuts and berries every week, and so he worked out a deal with Joe such that Joe would pay him a certain wage in coconuts and berries every week in exchange for Patrick helping Joe gather coconuts. If they have a productive week, Joe gets to keep the extra coconuts and perhaps trade some of the extra coconuts for berries with Mark. If they have a less than productive week, then Patrick still receives his certain wage and Joe has to suffer.On average, Joe and Patrick produce 50 coconuts/week. In exchange for his labor, Patrick gets 10 coconuts and 5 quarts of berries every week from Joe.Mark produces the berries on his own. He produces about 30 quarts of berries every week. Joe and Mark usually trad